On February 6, 2022, the Washington Department of Revenue’s Administrative Review and Hearings Division issued a determination concluding that a company providing a license to use data center space owes business and occupation (B&O) tax on the profits from the service. The taxpayer provides colocation services, which includes renting space in data center facilities for providing customer with the power, cooling and physical security for their server, storage, and networking equipment. The sale and rental of real estate is exempt from B&O tax. However, the Hearings Division previously concluded that a colocation provider was not renting real estate because it restricted its licensees’ access to the property and did not grant the licensee “absolute right of control” over the space. Accordingly, the Hearings Division determined that the taxpayer in this case also provides the nonexclusive right for licensees to have access to the premises, which is limited to installing and operating  equipment for purposes of interconnecting to the taxpayer’s network. Therefore, a mere license to use the taxpayer’s real estate for a narrow purpose without exclusive dominion and control over the real property was subject to B&O tax.

In this episode of the SALT Shaker Podcast, host and Eversheds Sutherland Associate Jeremy Gove is joined by Counsel Charles Capouet to finish our analysis of taxpayer wins and losses in 2021 thanks to the SALT Scoreboards, and how taxpayers fared. Jeremy and Charles discuss the Q3 and Q4 Scoreboards and what these end-of-year results may mean for litigation results moving into 2022. They also go over a variety of cases in depth, including the three digital services cases highlighted in the Q4 Scoreboard.

They wrap with Jeremy’s favorite question—overrated/underrated? This week: the Winter Olympics (and how they stack up versus the Summer Olympics).

Questions or comments? Email SALTonline@eversheds-sutherland.com. You can also subscribe to receive our regular updates hosted on the SALT Shaker blog.

 

 

 

 

 

 

 

 

 

 

 

 

 

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In a private letter ruling, the Texas Comptroller concluded that a medical record retrieval company was providing a taxable data processing service only to the extent it charged for copying of the records it retrieved. The Texas-based medical records retrieval company’s customers are attorneys and insurance companies. The company’s employees manually retrieve and review the records from medical providers as part of lawsuits. The company charged its customers: (i) an authorization fee for preparing the request and reviewing the records; (ii) optional copying fee, making the documents searchable, bates labeling, bookmarking, duplicating, or copying to CD, and (iii) a custodian fee reimbursing the company for charges from the medical provider for providing the records. Prior Comptroller rulings concluded bates labeling and making documents searchable were both taxable data processing services. Therefore, the Comptroller concluded that the company’s only taxable data processing service was the copying fee, while the custodian and authorization fees, were not taxable.

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award prizes for the smartest (and fastest) participants.

This week’s question: Which state recently stated they will accept crypto for payment of state taxes?

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $25 UBER Eats gift card.

Answers will be posted on Saturdays in our SALT Shaker Weekly Digest. Be sure to check back then!

South Dakota Senate Bill 157 proposes an exemption from gross receipts tax for sales of “enterprise information technology equipment” and software in excess of $2 million used in South Dakota data centers. Enterprise information technology equipment eligible for the exemption includes: (i) computer hardware, servers, routers, cooling systems and towers; (ii) temperature control and power infrastructure; (iii) exterior dedicated business-owned substations, and (iv) racking systems and other equipment necessary to maintain and operate a qualified data center. A qualifying data center is a South Dakota facility with a primary purpose to serve as a centralized repository for the storage, management, and dissemination of electronic information and data. This proposal would be restricted to data centers completed or “substantially refurbished” after December 31, 2021. Currently, the bill is set for a hearing before the South Dakota house commerce and energy committee on February 23, 2022.

On this episode of the SALT Shaker Podcast focused on policy issues, host and Eversheds Sutherland Partner Nikki Dobay entertains a full house. She is joined by Annabelle Canning, Partner at Capitol Tax Partners, and Eversheds Sutherland attorneys Maria Todorova and Justin Brown from the firm’s Atlanta office.

Justin gets the conversation started with an overview and background of the Tax Injunction Act (TIA) and the need for modernization to provide access to Federal Court for state tax cases that involve a federal question. The group then jumps into a discussion of the FAIR Coalition—the Fair Access to Interstate Remedies Coalition. The FAIR Coalition was formed to secure federal legislation that would modernize the TIA, due to inequities faced by taxpayers that are precluded from litigating in Federal Court.  They then detail the work of the FAIR Coalition, why it’s important to make changes now, and how it aims to reconcile inconsistent court decisions and provide additional guidance.

Wrapping up the conversation, Nikki’s surprise non-tax question this week deals with “walk-out” songs. What would your entry theme song be if you were a professional wrestler—or speaking at a SALT conference?

To learn more about the TIA, read an article written by Eversheds Sutherland SALT attorneys for the July-August 2021 issue of Tax Executive.

The Eversheds Sutherland SALT team has been engaged in state tax policy work for years, tracking tax legislation, helping clients gauge the impact of various proposals, drafting talking points and rewriting legislation. Partner Nikki Dobay, who has an extensive background in tax policy, hosts this series, which is focused on state and local tax policy issues.

Questions or comments? Email SALTonline@eversheds-sutherland.com. You can also subscribe to receive our regular updates hosted on the SALT Shaker blog.

 

 

 

 

 

 

 

 

 

 

 

 

 

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Today, California Governor Gavin Newsom signed budget trailer bill SB 113, allowing taxpayers to again fully utilize business tax credits, like the R&D credit, and net operating loss deductions for taxable years beginning on or after January 1, 2022. For tax years 2020 to 2022, AB 85 (enacted in 2020), limited the amount of business tax credits that could be claimed annually to $5 million and suspended use of net operating loss deductions for business taxpayers with income of $1 million or more (see our previous coverage on AB 85 here and here). Enactment of SB 113 is great news for businesses, as it lifts the restrictions imposed by AB 85 a year early, allowing businesses to use their net operating losses and full tax credits in computing their 2022 California corporate tax liability.

On February 11, Eversheds Sutherland Partner Nikki Dobay will present during the hybrid 2022 National Multistate Tax Symposium, which will explore some significant multistate tax and technology issues facing today’s tax departments.

As a panelist, Nikki will examine sourcing scenarios in light of some recent developments and consider documentary and electronic data collection and compliance options for your company, including what may be a permissible “reasonable approximation”; ways to plan for and manage related audits and disputes; and whether it makes sense to pursue proactive measures to reach a workable solution.

For more information about the meeting and how to register, click here.

In a recently released private letter ruling (issued October 13, 2021), the Wisconsin Department of Revenue concluded that certain online learning platform services were not subject to sales tax, whereas others were a bundled transaction and potentially taxable. The company’s platform is a virtual learning environment where students stream on-demand digital academic courses that consist of video lessons on a variety of topics, including academic subjects, professional topics, or vocational licensing preparation courses. Subscriptions also include access to live online tutoring to answer questions. Users cannot download the courses, but may be access them through the company’s mobile app that is downloaded. The company offered its service through different packages. Only those packages restricted to college courses for credit and tutor access were nontaxable educational services. Packages that with both taxable and nontaxable elements were bundled transactions. However, if the sales price attributable to taxable and nontaxable products in the bundled transactions could be determined, then tax should only be collected on the portion of the sales price attributable to taxable products, and if the taxable portion of the sale is less than 10%, the whole package is not taxable.

Calling all trivia fans! Don’t miss out on a chance to show off your SALT knowledge!

We will award prizes for the smartest (and fastest) participants.

This week’s question: Which state was the first to pass legislation decreasing corporate and individual income tax rates this year?

E-mail your response to SALTonline@eversheds-sutherland.com.

The prize for the first response to today’s question is a $25 UBER Eats gift card.

Answers will be posted on Saturdays in our SALT Shaker Weekly Digest. Be sure to check back then!